2013 Tesla Model S on Chilcotin Highway, Canada [photo: owner Vincent Argiro]
The government of Ontario amended its plug-in electric vehicle incentive program in March, eliminating incentives for vehicles with a recommended price of $75,000 or more.
What effect will this have on demand for Tesla’s Model S and X?
Two years ago, this site analyzed the impacts on electric-car sales in British Columbia when funding for purchase rebates up to $5,000 ran out in Februrary 2014, and was later restored in April 2015.
DON'T MISS: When Electric-Car Incentives Return: British Columbia Case Study (Jan 2016)
That episode may offer some insights, though the usual caveat that “past performance is not necessarily indicative of future results” applies.
Canadian plug-in electric vehicle sales actually rose during the period BC's incentives vanished, so we compared sales trends in British Columbia to those from Ontario and Quebec, the other two provinces with incentive programs.
The sales ratio—BC / (ON+QC)—for the Chevy Volt and Nissan Leaf dropped by half when the purchase rebate disappeared. The ratio then rose slightly above prior levels when the purchase rebate returned.
2014 BMW i3 REx vs Chevrolet Volt comparison [photos: David Noland, Tom Moloughney]
2014 Nissan Leaf, Bear Mountain, May 2014
Tesla Model S at Cypress Mountain, British Columbia, Canada
This seemed to indicate “mass market” plug-in electric vehicle buyers were sufficiently price-sensitive that a $5,000 price increase deterred them from going electric.
But the sales ratios for the BMW i3 and Tesla Model S were unaffected during this period—suggesting purchasers of luxury brand plug-in electric vehicles were not so price-sensitive.
To be sure, a formal academic analysis would have teased out other factors.
READ THIS: Electric-Car Market Share In 2013: Understanding The Numbers Better (Jan 2014)
The BMW i3 went on sale after incentives had vanished, so the first several months’ worth of buyers might not have been price-sensitive—or they may have been electric-car supporters loyal to BMW, who were going to buy an i3 regardless of price.
The minuscule rise in the Model S sales ratio after incentives disappeared seemed to indicate Tesla buyers to that point also weren’t price sensitive. (The increase probably wasn't statistically significant.)
But the halving of sales for the Volt and Leaf when rebates expired was roughly in line with a 2013 analysis of the American auto market by base-model price point.
Plug-in electric car sales incentives in Canada by province [chart: Matthew Klippenstein]
That study found that each $5,000 increase in base-model recommended price, from $25,000 to $50,000, seemed to shrink the market by 40 percent.
Put differently, sales of autos with a starting price of $40,000 and above were 40 percent lower than sales of those at $35,000 and above, which were themselves 40 percent lower than sales of vehicles starting at $30,000 and above.
These examples are subject to so-called “noise factors”. Buyers rarely buy base-model vehicles, and dealers and carmakers sometimes discount their products.
Still, the rough agreement between the two data sets seemed to suggest they were in the right ballpark.
Tesla buyer price sensitivity In BC
Public-policy support for plug-in electric vehicles in Canada is summarized in the table above. The past two years have seen a variety of changes in provincial rebates.
In March 2016, British Columbia eliminated rebates for plug-in electric vehicles priced at $77,000 or above. The same month, Ontario cut rebates for electric cars with recommended prices of $75,000 or above.
The accompanying charts shows the monthly sales figures for the Tesla Model S in British Columbia and Ontario, along with six-month averages of the sales ratio between the provinces. All data was sourced from IHS Auto.
Tesla Model S sales in Canada: impacts of rebates in British Columbia [graph: Matthew Klippenstein]
The cancellation of rebates in BC in 2014-2015 is shown not to have affected the sales ratio. Skipping over March 2016 for the moment, we observe that the sales ratio did not change after February 2017, when Ontario rebates were restored.
If Tesla buyers in Ontario relied on these rebates, we would have expected sales there to increase. The BC/Ontario sales ratio would have decreased because the denominator (Ontario sales) would have been larger.